NZX-listed insurer Tower has nearly doubled its expected claims cost from the Auckland Anniversary Weekend floods and is now forecasting a half-year after tax loss and says shareholders won't get a half-year dividend.
The Tower share price dropped 3.5c (5.7%) to 58c on Monday.
Tower chief executive Blair Turnbull said with assessment of the bulk of the 5550 claims for the 'Auckland and Upper North Island Weather Event' now completed, the company now estimates the average claims cost for this event "will be around double" that of other recent large weather events.
This is because of deeper flood waters in high density areas causing substantially more damage, contamination, and landslides.
Consequently, Tower has increased its estimate for the ultimate cost for this event to a range of between $195 million to $225 million, up from a previously estimated range of $95 million to $125 million. Costs above $11.9 million for this event will be covered by Tower’s reinsurance for catastrophe events.
On Cyclone Gabrielle, Tower said it had received approximately 3350 claims and estimates the financial impact of this event to be within the range of $55 million to $75 million. Costs above $11.9 million will be covered by Tower’s catastrophe reinsurance cover.
Tower has also received 250 claims for cyclone events in Vanuatu in March and estimates the net financial impact after proportional reinsurance to be $10 million, "which is within Tower’s FY23 large events allowance".
Tower expects to report a loss after taxation for the first half of the September 2023 financial year of around $3 million.
"Accordingly, Tower expects that it will not pay an interim dividend. A final decision on a full year dividend will be made when Tower’s full year results are finalised."
Tower says it has "robust reinsurance arrangements" with "multiple levels of cover" in place providing up to $889 million of catastrophe cover.
"In line with Tower’s prudent and comprehensive approach to reinsurance, Tower is seeking to reinstate catastrophe reinsurance to cover the increased cost of the Auckland event. Tower has full protection for a third catastrophe event and will reinstate full levels of protection for a fourth catastrophe event in the financial year.
"Tower has sufficient reinstatement cover for Cyclone Gabrielle claims."
In terms of the full-year to September 2023, Tower's now expecting "underlying" net profit after tax of between $8 million and $13 million, down from an earlier expectation of a range of between $18 million and $23 million.
"This guidance includes the expected cost of further reinstatements to reinsurance arrangements as well as an increase in the large events allowance.
"Large events costs now total $34 million. Therefore, acting prudently, Tower has increased its FY23 large events allowance from $40 million to $50 million.
"Tower is also increasing its guidance for gross written premium (GWP) growth from a range of 10% to 15%, up to a range of between 15% and 20%. This increase reflects strong rating response to address inflation, reinsurance increases and higher motor and other claims frequency."
4 Comments
Assessment != claims paid out. We made a claim with Tower Insurance for the Auckland anniversary floods. The initial assessors came through really quickly, and then absolute silence till now. Ditto for all my friends and colleagues who are with Tower. It seems like they're trying to drag out the claims process as long as possible so Tower can defer cashflow, or people drop their claims and self-repair heading into winter without carpets. Also interesting their excuse about being short-staffed when a quick look at their open roles only has four roles open (2 in IT, 2 in training).
I suspect their next market release won't be rosy.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.